Over the past thirty years or so, China’s economy has expanded by a head-spinning 4,000%. This has been largely due to manufacturing — and explains why we’ve gotten accustomed to seeing a “Made in China” stamp on the bottom of things.
But now there are signs that the world’s manufacturing superpower may soon be handing the reins to someone else — which could spell opportunity for savvy investors. After doing some digging into China’s industrial landscape, I’ve found two prevailing themes:
- The country is making a big push to join the elite club of developed economies that get most of their GDP from services, rather than manufacturing or agriculture.
- At the same time, they’re facing major political and economic challenges that could endanger their almost-superpower status.
Taken together, these two facts suggest that China’s status as “the world’s factory” has limited shelf life. So now is a good time to scope out which country – or countries – could pick up the slack in the future.
The Belt and Road Initiative
As it turns out, China itself might be answering that question for us. Since 2013, the country has been investing heavily in manufacturinginfrastructure for less developed nations in Africa, Asia and even eastern Europe, as well as beefing up the trade routes that connect them with those nations.
This project – known as the “Belt and Road Initiative”— will theoretically allow them access to cheap resources in areas that more advanced economies have snubbed. While many have accused China of using it to make predatory deals with underdog countries, it could work out to the benefit of everyone involved.
As the saying goes, “a rising tide lifts all boats.” The above chart, for example, suggests that participating countries have seen a notable uptick in productivity. But that doesn’t tell us a whole lot by itself – so let’s dig a little deeper.
The next world’s factory?
It’s certainly possible that the Belt and Road Initiative won’t be the only deciding factor for who ends up as heir to China’s manufacturing throne. Many pundits and analysts would likely point at India, for example, because of its large population and industry-friendly government. And Taiwan has long excelled at making the high-end tech components that are almost ubiquitous now.
But the BRI serves as a nifty directory of which countries might be recruited for the honor by China itself. According to one World Bank study, they could shake out like this:
Does this mean we should be putting all our foreign investment chips into Malaysia, Bangladesh, Pakistan or even Thailand? No, of course not. But this should give you a strong starting position for deciding where to allocate the long-term growth portion of your portfolio – because, as I’ve said before, the beauty of today’s market is that you’re not beholden to one country’s economy.